The big change in the former has been the rise of economics departments around the world in virtually all developed countries (though not Italy). It's now quite easy to encounter a place you have heard of — yet never really thought of — and find they have a bunch of young faculty with articles in tier one journals. In essence the standards are now so high in terms of skills and data sets and thoroughness that it is mainly the young and ambitious who publish in tier one journals. Those people are found around the world.

The 44-year-old tenured Princeton economist isn't so much in the AER as in times past. The incentive, relative to the required work, has changed dramatically. Note also that consulting returns, or public intellectual returns, are more lucrative today than they were twenty or thirty years ago.

Empirical work usually has a shorter shelf life and top producers cash in earlier than before. So the top six schools have a smaller intellectual edge than was once the case. Many mid-tier U.S. schools are lower on the totem pole, or simply stuck in a thick mix of numerous global competitors, without in any way being noticeably worse but no longer having privileged third-tier positions either.

The supply of world class candidates far outstrips the number of jobs available at the traditionally top departments. That’s good news for all the other schools. The problem is not limited to Econ departments either.

MattMarch 23, 2010 at 8:46 am

That’s because macro is not apologizing for these “horrors”, as you put it, nor is it admitting that anything has happened which should change things in a fundamental way. Business as usual.

efficient_marketsMarch 23, 2010 at 10:20 am

Dearieme, physics, as a discipline, has been shown to be largely vacuous by it’s failure to measure the position and momentum of a particle simultaneously.

Oops, actually that’s not true. Physics claims that you *can’t* measure the position and momentum of a particle. Econ (the efficient markets hypothesis) claims that “recent horrors” *can’t* be predicted. And lo and behold, they were unpredicted.

The failure to measure the position and momentum of a particle vindicates physics just as surely as the failure to predict the bubble bursting vindicates the EMH.

@efficient_markets: Yes, but the Heisenberg principle led to progress in quantum physics.

On the other hand, how does the failure to predict/prevent show the usefulness of macro?

ChadMarch 23, 2010 at 11:26 am

True, macro is mostly vacuous. And it’s hardly special for a field to declare it can’t predict something and then go ahead and not predict something. But it’s asking too much for macroeconomists to predict much about complex systems.

NCMarch 23, 2010 at 1:12 pm

Modern academic macro actually saved the world. Bernanke’s policies came straight out of his papers. Fiscal policy stimulus also came straight out of textbook recommendations in economies with liquidity trap once the zero-bound was hit.

Hail macro.

JoshMarch 23, 2010 at 1:33 pm

Macroeconomics has a big credibility problem. You see no matter how many recessions or depressions they manage to stave off or mitigate through their policy suggestions it’s really hard measure events that didn’t happen. Thus, anywhere from 0 to 50 economic recessions may have been avoided thanks to macroeconomics since its development and no one would ever be able to prove that it was actually the policy that prevented these catastrophes. What people will notice is everything macroeconomics misses, not what it gets (thus we can measure failures aka cost, but not benefits aka policy successes)?

juniorguyMarch 24, 2010 at 6:30 am

OK, jabs at macro folk aside, let me actually take a stab at replying to the post. Reverse threadjacking, if you will. I’m a junior person at none of the following places. I have my own impressions based on what I’ve seen on the macro-finance-labor side of things; these are 100% my opinions.

In Europe, LSE has clearly gotten things together and is a top-class place. Oxford and Cambridge still have funding problems. Berlin and Bonn have made attempts but the funding isn’t quite there, and Frankfurt is currently attempting to build a good department in conjunction with the Bundesbank and ECB. Pompeu Fabra in Spain and Bocconi in Italy are also doing better. The reason why Germany and Britain lag so far behind is funding, in addition to the lack of a clear tenure track. That’s why Stockholm has a good cluster of researchers, and there are odd pockets of excellence at places like Louvain and Toulouse. Most places in Europe remain unattractive for most Americans because living in a small place that was rebuilt after the war, on a lower salary, with unfriendly locals and lazy students, is simply not enjoyable. Outside of a very few top places in Europe, most places resemble a directional state University in the US but with a lower standard of living…better ingredients for cooking though.

In the US, what we’re seeing is a reorientation toward specialization, which I think was one of the themes of Krugman’s writing back in the ’90s. Places like UC Santa Barbara and Santa Cruz have gotten better by specializing in different stuff; San Diego has gone toward more applied research now that Granger and Engle have been gone for some time; UCLA is on its way down; Berkeley and Stanford remain to be seen. The UC system has serious funding problems, cost of living problems, and political risk.

Chicago’s econ department is on its way down, and much of the action seems to be at Booth these days. Northwestern is holding steady. NYU was on the way up as of ten years ago, and Columbia has made huge improvements since then. Penn is holding steady as a very odd place that does serious macro. MIT and Harvard are the numeraire, so they are holding steady by construction. Minnesota is holding steady.

The common theme seems to be funding, plus changes in the way research is being done. The Internet has made it easier to communicate and find information, and this means that people at mid-tier places have the ability to stay current with things much more easily. Computing is cheaper, so things have become much more seriously quantitative. This can also lead to a bit of groupthink especially among junior people, since everybody has been focusing too much on the three-equation New Keynesian (or is it old Monetarist?) model without really understanding it. The ability to do good research is somewhat, but not entirely, less tied to where one is sitting. There’s still no substitute for knocking on someone’s door.

LiliaJuly 23, 2010 at 3:23 am

Speaking of standards, of course they’re high because these days we’re handling more information then our parents did. Ever day we receive a bigger volume of knowledge and we’re just supposed to assimilate it.
Lilia Gephardt @ Domain name